Paul Atkins, President Donald Trump’s nominee to chair the Securities and Alternate Fee, is a monetary omnivore. He has fairness in Chinese language tech large Alibaba, holdings in crypto firms, and stakes in enterprise capital corporations. And he additionally owns a bulging portfolio of life insurance coverage insurance policies: 54 to be precise, which he holds along with his spouse and household.
That is in accordance with a current ethics disclosure, which should accomplished by company heads (Atkins will seemingly be confirmed as SEC chairmain this week), Members of Congress and different high-level officers.
To place the Atkins’ 54 life insurance coverage insurance policies in context, in 2023, there have been just below 260 million energetic insurance policies within the U.S., in accordance to the American Council of Life Insurers—fewer than one, on common, for each American grownup. In the meantime, the life insurance coverage insurance policies represented virtually 10% of Atkins’s internet price, which Bloomberg places at at the least $327 million.
The choice by Atkins to amass dozens of life insurance coverage insurance policies flummoxes even some consultants.
“It might make no sense for a person to have 20, 30, 40, not to mention 50, common life insurance policies on their very own life,” James Carson, a professor on the College of Georgia who researches the insurance coverage market, advised Fortune. Why, then, does Atkins personal so many?
Fortune reached out to Atkins for remark by means of the consultancy agency Patomak International Companions, the place he’s CEO, however didn’t obtain a reply.
Dying and taxes
Maybe the incoming SEC chair’s dozens of life insurance coverage insurance policies are a automobile to cut back the taxes he owes, Timothy Harris, an economics professor at Illinois State College, advised Fortune.
There are two foremost varieties of life insurance coverage: time period and entire. Time period insurance policies are in impact for a set interval of, say, 20 or 30 years. The latter keep in impact for a policyholder’s life. Every of Atkins’ 54 insurance policies are in the entire class, or a variation of it often called “common.”
Entire life insurance coverage combines a financial savings account with a demise payout. Policyholders deposit cash into their account and obtain tax-deferred curiosity. Once they die, beneficiaries obtain the saved cash, curiosity, and lump sum. “It is much less so about insuring towards untimely demise, and it is extra of an funding automobile,” Harris stated.
For many who haven’t maxed out their contributions to extra conventional retirement autos, like 401(okay)s and Roth IRAs, entire life insurance policy aren’t the perfect funding, Harris stated. However “for prime earners which have already exhausted all the advantages from a 401(okay), you may flip to those entire or common life insurance coverage insurance policies to attempt to circumvent among the taxes,” he added.
Complicated funds—or a speculative wager
Atkins’ hoard of life insurance coverage insurance policies isn’t “a traditional factor,” Patricia Born, a professor at Florida State College’s School of Enterprise who research threat administration and insurance coverage, advised Fortune. However there could also be a proof past taxes, she stated.
The incoming SEC chair’s funds are complicated. He has a number of trusts, sits on the board of a number of firms, and is the CEO of economic consultancy Patomak International Companions. Corporations typically grant workers or board members life insurance coverage insurance policies, she stated. “And it will make sense to have insurance policies written particularly to pay to every of these trusts,” she added.
However Carson, the professor on the College of Georgia, believes the handfuls of insurance policies replicate one thing else: a call by Atkins to buy the life insurance coverage of others.
Such transactions aren’t unusual. In some circumstances, a coverage holder might determine the premiums are too costly, or that they not want them to supply for family members. Those that need to dump their life insurance coverage can promote it again to the corporate that issued it for a “give up worth,” or a buyback worth.
Coverage sellers can, although, select to promote to a 3rd social gathering that provides greater than the unique issuer. In these circumstances, the third social gathering would proceed to pay the coverage’s premiums and, if the unique vendor had been to die, obtain the windfall. Those that purchase one other’s life insurance coverage coverage are betting on an individual’s life. Will that individual die quickly sufficient to make the short-term ache of month-to-month or annual charges price it?
Carson is satisfied this is the reason Atkins has 54 life insurance coverage insurance policies. “This man clearly likes to have an enormous pool of assorted investments,” he stated. “And I feel these are investments.”
He pointed to the number of issuers on Atkins’ disclosure doc in addition to the variation in worth of the life insurance coverage insurance policies. Some are price north of $1 million, and others lie between $1,000 and $15,000.
Atkins is presently in entrance of the Senate in a affirmation listening to on Thursday. He plans to or has already divested a big portion of his holdings, however not his life insurance coverage insurance policies, in accordance with an ethics settlement.
This story was initially featured on Fortune.com
